Summary:
Trump says he has ordered $200 bn in MBS purchases to lower mortgage rates
Plan aims to compress mortgage spreads and reduce monthly payments
Purchases would be linked to Fannie Mae and Freddie Mac resources
Proposal revives state-led intervention in housing finance markets
Markets may view comments as political pressure on long-term rates
Donald Trump said, in a 'tweet' ('truth') on his own social media app, he has instructed government representatives to purchase $200 billion of mortgage-backed securities (MBS), framing the move as a direct intervention aimed at lowering mortgage rates and restoring housing affordability in the United States.
In a statement posted on social media, Trump said housing affordability has deteriorated sharply as mortgage rates surged, placing home ownership further out of reach for many Americans.
Trump said the planned MBS purchases would be funded through Fannie Mae and Freddie Mac, government-sponsored enterprises that he noted were not sold during his first term, a decision he described as contrary to expert advice at the time. According to Trump, those entities are now worth “many times” their prior valuations and collectively hold roughly $200 billion in cash, which he argues can be deployed to support the housing market.
The president said large-scale MBS buying would narrow mortgage spreads, push borrowing costs lower, and reduce monthly mortgage payments. He described the move as part of a broader strategy to reverse what he characterised as damage inflicted on housing affordability over the past several years.
While Trump did not specify which agencies or officials would execute the purchases, the proposal effectively revives the concept of state-directed demand for mortgage securities, a tool historically associated with crisis-era monetary policy. Markets may interpret the comments as signalling political pressure to use government balance sheets to directly influence long-term interest rates, particularly in housing finance.
The announcement comes amid ongoing debate over the appropriate role of government-backed institutions in stabilising housing markets and managing mortgage costs, especially as affordability metrics remain stretched despite easing inflation elsewhere in the economy.
$200bn QE in MBS.
2026 is an election year, Trump's fall in popularity will be a negative for the Republican Party in the mid-terms.
I expect there will be more populist fiscal policy as trump seeks to buy votes like this in the months ahead. This profligacy will weigh on the USD.
